The European Commission has approved Lloyds Banking Group's plans to float its TSB stake on the London Stock Exchange, paving the way for a share sale by the end of June 2014.
The Commission on 13 May said it had extended the November 2013 deadline for Lloyds to sell off the 631 branches, to the end of 2015.
EU Competition Commissioner Joaquin Almunia said establishing TSB as a separate bank will boost competition in the UK retail banking space and create a "viable and competitive bank."
"The proposed changes in the divestment perimeter will enhance TSB's profitability and preserve its viability as a challenger in the market," Almunia added.
Lloyds said earlier in the month that it proposes to list 25% of its TSB stake on the LSE. Lloyds' finance director George Culmer said analysts had valued the IPO at around £1.5bn (€1.8bn, $2.5bn).
Lloyds, which is 24.9% owned by the taxpayer, is forced to sell off a chunk of that business under the terms of the £20.5bn bailout package it received from the government in 2008.
Originally Lloyds had planned to sell the branches to the Co-operative Bank, but the proposed deal fell through when Co-op suddenly pulled out amid issues around its capital position.
Lloyds reported a 22% jump in first-quarter pre-tax profit. It returned £4.2bn to the UK taxpayer during the first three months of the year.
In September 2013, Lloyds officially split TSB into a separate challenger bank.
TSB, which has roots dating back to the early 19th century and merged with Lloyds in 1995, took on five million customers from Lloyds.